Cross Default

AAA

DEFINITION of 'Cross Default'

A provisions in a bond indenture or loan agreement that puts the borrower in default if the borrower defaults on another obligation.

Also known as "cross acceleration".

INVESTOPEDIA EXPLAINS 'Cross Default'

This provides more security to the lender. You can think of this as an "out-clause" to the contract.

RELATED TERMS
  1. Indenture

    A legal and binding contract between a bond issuer and the bondholders.
  2. Convertible Bond

    A bond that can be converted into a predetermined amount of the ...
  3. Default

    1. The failure to promptly pay interest or principal when due. ...
  4. Default Risk

    The event in which companies or individuals will be unable to ...
  5. Exposure At Default - EAD

    A total value that a bank is exposed to at the time of default. ...
  6. Bond

    A debt investment in which an investor loans money to an entity ...
RELATED FAQS
  1. Do convertible bonds have voting rights?

    Convertible bonds usually have no voting rights until they are converted. Even after conversion, they may not be granted ... Read Full Answer >>
Related Articles
  1. Bonds & Fixed Income

    Bond Call Features: Don't Get Caught Off Guard

    Learn why early redemption occurs and how to avoid potential losses.
  2. Bonds & Fixed Income

    Should Junk Bond ETFs Be a Part of Your Portfolio?

    Should junk bonds be a part of your portfolio? Here's what you need to know.
  3. Professionals

    Vanguard Readies Muni Bond ETF

    Vanguard is set to roll out a muni bond ETF, the firm's first.
  4. Mutual Funds & ETFs

    Is the TLT ETF a Good Bet for the Long Run?

    Is the iShares 20+ Year Treasury Bond ETF (TLT) a good bet for the long run?
  5. Bonds & Fixed Income

    African Equities vs. Bonds: Risks and Rewards

    A look at the risks and rewards of exposure to African equities vs. bonds.
  6. Bonds & Fixed Income

    How Rate Hikes Will Affect Your Investments?

    An interest rate hike by the Fed, which will happen either during their June or September meeting, could impact your fixed income investments.
  7. Professionals

    Is Now the Time for Junk Bonds?

    A bet on high-yield bonds is a bet that the global economy will continue to improve...but not too much.
  8. Mutual Funds & ETFs

    Preferred Stock ETFs: Are They Right for You?

    Considering preferred stock ETFs? Here's a look at their pros and cons.
  9. Mutual Funds & ETFs

    PIMCO vs. BlackRock: Weighing Mega Fund Managers

    A look at the world's biggest bond manager and the world's largest asset manager.
  10. Mutual Funds & ETFs

    The ABCs of Mortgage-Backed Securities ETFs

    ETFs focused on mortgage-backed securities, or MBS, offer an opportunity to further diversify the fixed-income portion of your portfolio.

You May Also Like

Hot Definitions
  1. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  2. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  3. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  4. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  5. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
Trading Center